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Frequently Asked Questions (FAQs)

1. What is the 49th State Angel Fund?

Funded by a federal allocation of $13.2 million from the State Small Business Credit Initiative (SSBCI), the 49th State Angel Fund was created when the Municipality Of Anchorage successfully applied for federal treasury’s Venture Capital program under SSBCI, which was designed to provide “investment capital to create and grow start-up and early-stage businesses.”

2. What does the 49th State Angel Fund do?

Largely, invest in locally-focused investment funds. These funds in turn make investments into a variety of Anchorage businesses. Desired features are either companies that are early-stage startups with a focus on scaling, or an operational history showing a few years of company stability, with those firms subsequently positioned for growth.

Since 2015 49SAF has been pursuing its work in the manner of a "fund of funds." This means we work with the private sector in order to set up a local investment fund, which is run by private managers. Our equity interest in that fund then means we have an indirect equity interest in the operating company which receives investment.

3. Does the 49th State Angel Fund offer grants?

Currently we invest, and do not make grants. Each public dollar is matched by a minimum of a private dollar in the investment, we invest largely for return on investment in tandem with goals of growing business in Anchorage. We believe the business model of angel investment is a strong method of deploying early-stage capital into Anchorage startups. Having an investment at stake and expecting a return also helps entrepreneur performance, making the firm stronger and more prepared when it enters the competitive marketplace.

At rare times the 49th State Angel Fund may make contributions toward growing Anchorage, or Alaska's, entrepreneurial ecosystem--if such capital is available.

4. What’s the mission of the 49th State Angel Fund?

It is to:

•Provide a source of capital to high-growth businesses. This promotes entrepreneurship and fosters innovation, creating jobs and economic benefit for Anchorage.
•Help strengthen the local angel investment network and attract additional venture capital to the city.
•Assist early-stage and disadvantaged businesses.

5. Who should I contact for help applying or with questions?

Many questions can be answered as our website continues developing. Please also carefully review this list of frequently asked questions. Otherwise, please contact call the office at 907.343.4898.

6. What is angel investment?

It’s a form of early stage equity or equity-like investment that typically involves an individual investor providing money to help get a business off the ground or through an initial phase. Seed money is invested into what the angel hopes are high-growth business startups. Because there is considerable risk involved in this type of investment, a higher than average return is expected. This is a multiple of the original investment, not a percentage.

Not all 49SAF Partner funds focus on early-stage opportunities. Some, as discussed above, simply prefer firms with stable operational history poised for growth.

This means that while making one individual angel investment is high-risk, building a portfolio is a best practice. It also means that successful, high-return ventures are a way for angel investors to counterbalance losses. This will be true of the 49th State Angel Fund as well: Failure will occur when investing at the seed stage in unproven startups. Most likely, early results will be losses, with better investments taking more time to mature.

8. How does the 49SAF invest?

Like an angel investor, the 49SAF provides money for high-growth start-up businesses. 49SAF taking a partnership interest in third-party angel or venture capital funds requires at least a 1:1 (private dollar to public dollar) match and which demonstrate the ability to reach 10:1 in such leverage over time.

9. Why the matching funds requirement?

Three reasons:
1. The 1:1 match is a requirement per the conditions of the SSBCI allocation (i.e., the money that 49SAF received) from federal treasury.
2. It’s also a best practice to invest with others. This helps ensure that more than one party keep an eye on the venture to help ensure its success.
3. It’s tied to the overall performance metric of 49SAF: Per federal treasury, 49SAF’s goal is to leverage the funds it provides to businesses 10 times within five years.

10. But I have a small business, and want to apply for these funds--how can I do this?

Head over to our partner fund page and review the different investment funds which are available to you; reach out to the managers you feel are a best fit by e-mail. Alternatively, if you have more questions and need guidance, e-call us at 907.343.4898 and we will be happy to talk with you.

11. How much money can my business receive through one of the 49th State Angel Fund's "partner funds?"

Most financing needs of an Alaska small business could be met if the partner fund investment managers find merit. A minimum floor (as a guide--not necessarily) would be $100,000.

12. Why is 49SAF doing indirect investment?

Indirect investment is the most efficient way to deploy early-stage capital into the Anchorage market. 49SAF did run a direct investment program for over two years; we found, however, that while we upheld best practices in venture capital, we also had a low rate providing direct financing to the market (note that venture-backed businesses are typically only succesful in securing any financing 1-5% of the time).

If you have a small business and are seeking financing, head over to the partner fund page and reach out to an appropriate fund manager, or call us to discuss at 907.343.4898.

If you are an angel investor, venture capitalist, other investment professional or economic developer, please e-mail us and we'll set up a meeting in order to better explain our process for proposing a 49SAF partner fund. Proposals will be vetted on a rolling basis, if capital is available for obligation.

15. What is the full process for applying to 49SAF as a partner fund?

Applications and proposals are accepted on a rolling basis, and all will be reviewed. Our committee meets at least quarterly each year.

First, \we recommend you first speak with 49SAF staff or an advisory committee member first prior to putting forth a proposal. Our goal is to have successful applications! Then 49SAF staff and consultants will take you through the best practices of putting a proposal together, which includes offering you a proposal guide, etc.

Once submitted, as long as your opportunity is compliant with our program and passes a quality baseline, the 49th State Angel Fund Advisory Committee will review your proposal. It's up to them to determine whether to recommend it for financing. You will make an in-person presentation to the committee. Should they recommend you for financing, you will continue along the process.

Negotiation and due diligence on your fund and its managers will occur, likely taking no less than 90 days. Note that it typically takes between 12 and 24 months to raise a VC or angel fund; thus a timeline will be established and a cutoff in order for our investments to proceed.

Applicants passing due diligence will then be put forward to the Mayor and Chief Financial Officer for funding and final approval. Both must approve the investment, along with the committee recommendation, for it to be finalized.

16. What type of business is a strong applicant to receive this money, from one of the 49SAF partner funds?

Any high-growth business that shows significant economic potential for Anchorage is a good candidate. Some of the most popular sectors for angel investment are software, healthcare, industrial/energy, biotech, IT services and media (Source: Centure for Venture Research, PDF link). We should all recognize, however, Alaska is different from much of the US economically and that diversion from these sectors is likely.

17. What does high growth mean?

From thestartupgarage.com, "A startup company, also referred to as a high-growth startup, is a company with a business model that is designed to be repeatable and scalable. This is directly opposed to a small business which is typically more of a lifestyle business that is not primarily concerned with scalability, but aims to sustain a particular level of income to enjoy a particular lifestyle." That said, if your business is aiming to achieve millions in revenues, you might be a candidate for financing.

18. Will these funds be available to businesses located outside the boundaries of the Municipality of Anchorage?

Exceptions exist, and being outside the Municipality of Anchorage is not necessarily prohibitive. Still, the economic benefit to Anchorage and the impact of that investment needs to be considered.

19. How much funding is available?

The 49th State Angel Fund has been awarded $13,168,350 by Federal Treasury. Of these funds, $481,960 has been dedicated toward financing program adminsitration. Thus over $12,686,390 is for investment in small businesses, per our agreement (we write "more" because Anchorage received an additional $50,000+ allocation in 2017).

20. Is the funding primarily debt or equity?

49SAF and its partner funds underwrite investments typically involving equity. At times, debt financing may be used, but it needs to have an equity or equity-like component.

21. Where do I apply for the 49th State Angel Fund?

Call us at 907.343.4898 to discuss your opportunity. Keep in mind currently 49SAF only operates as a Fund of Fund: We do not invest directly into Anchorage businesses. Depending on our capital availability (at times, the $12.7M+ available for investment has been fully obligated), we may or may not consider proposals for new investment funds.

22. What do I have to do to successfully apply as an investment fund to the 49SAF?

The process is the same as if you were attempting to create an investment fund in the private sector: Develop a depth of materials inspiring confidence among our Advisory Committee and stakeholders in order to achieve an initial investment recommendation. Then negotiate a strong opportunity for all parties involved, go through the due diligence process of the 49SAF and be able to raise matching private funds, leveraging the dollar-to-dollar requirement of the 49SAF with private commitments.

23. Are there fees involved?

There are no fees for bringing forward proposals to either 49SAF or our partner funds.

24. What are the eligibility requirements?

Individually businesses receiving 49SAF capital must:

• Be physically located within the Municipality of Anchorage or provide it with potentially significant economic benefit.
• Comply with all aspects of the Investee Certification for Use of Proceeds
• Have fewer than 750 employees and a transaction size less than $20 million
• Not be a related party transaction to anyone investing the 49SAF (not be a pre-existing owner or financial interest of a 49SAF partner)
• Not be delinquent in paying any nonprotested local, state or federal US taxes
• Have no principal owners who are convicted sex offenders.
• Understand that :
o Additional information or control rights may be required, per the terms of the investment.

Best fit businesses for 49th State Angel Fund investment are those which:
• Can demonstrate 10x leverage within five years,
• Create significant economic impact within Anchorage
(jobs being a key component)
• Scale quickly and communicate an exit strategy

Indirect: 3rd Party Funds 49SAF Partnership Must—
• Invest only in businesses which meet the above requirements
• Be a partnership, limited partnership, corporation, limited liability company, limited liability partnership, trust, or estate.
• Be organized for the purpose of investing in a portfolio of nonpublicly traded that meet program objectives.
• Consist of at least three accredited or qualified investors as defined by Securities and Exchange Commission regulation D, rule 501.
• Be in compliance with the securities laws of this state
• Have no principal owners who are convicted sex offenders

25. What financial options or packages are available to businesses?

49SAF does not currently make direct investments into operating companies. Please contact one of our Partner Funds for more information. Typically equity is involved although debt instruments may be considered.

26. Are the funds available to any type of business?

49SAF investment is not permitted for purposes of passive real estate investment, in speculative activities which earn revenue from price fluctuation, gambling establishments, pyramid sales plans, a business that earns more than half its revenue from lending activities (with CDFI exceptions), public utilities and administration. Businesses involved in illegal activities of any kind are also ineligible.

27. My business isn’t likely to grow its balance sheet 10 times in five years. What should I do?

Not all businesses are the right fit for 49SAF: Our program was designed to provide a missing source of capital for businesses which often have difficulty finding more traditional means of funding. That said, many funding opportunities exist through Alaska banks, credit unions, individual equity investors as well as arms of government. Contact Alaska’s Small Business Development Center (http://aksbdc.org/) or a financial advisor for further guidance.

investors typically expect quarterly unaudited financial and key activity reports to monitor commitments. Annual reporting is also often required. Other terms likely to be required are information, board voting or observation rights. Other covenants may exist depending on the individual offer.

Consider also that all investors are concerned with the final result: Achieving a return acceptable for undertaking a potentially higher-risk investment; these funds are not grants into operating companies. The word "angel" means an acceptance of the significant risk taking in a local or high growth investment, not the abandonment of a focus on return.

30. If I a partner fund determines I qualify, when would I receive funding?

It depends on the process of that individual fund. Often 90 days at a minimum is typical, as investors undertake due diligence and negotiation.

31. I'm the owner of a new restaurant or retail store. Can I apply?

Yes, but keep in mind 49SAF does not finance businesses directly--you need to inquire about financing from one of our Partner Funds. While some 49SAF Partner Funds invest in restaurants, others prefer financing businesses with higher potential scalability and growth rates.

32. What is the State Small Business Credit Initiative (SSBCI)?

The SSBCI is a Federal program administered by the Department of the Treasury (Treasury), which was funded with $1.5 billion to strengthen state programs that support private financing to small businesses and small manufacturers. In conjunction with leveraged private financing, the SSBCI is expected to help spur up to $15 billion in lending to small businesses and manufacturers that are not getting the loans or investments they need to expand and create jobs. The SSBCI allows states, territories and eligible municipalities the opportunity to build upon or create successful models for state small business programs, including Capital Access Programs (CAPs), and Other Credit Support Programs (OCSPs) such as collateral support programs, loan participation programs, loan guarantee programs, and venture capital programs.

33. How long will the SSBCI operate?

The SSBCI is a one-time program of limited duration. The authorities and duties of the Secretary of Treasury to implement and administer the program terminate on September 27, 2017. The 49th State Angel Fund, however, has no definitive end date and is operating beyond the timespan of the SSBCI program.

34. Are funds transferred under SSBCI considered a grant or other type of federal assistance?

No. Section 3003(c)(5) of the Act specifically states that funds transferred to states, territories, and eligible municipalities under the SSBCI program are not considered federal assistance for the purposes of subtitle V of title 31 of the United States Code. Because SSBCI funds are not considered federal assistance or a grant, many federal assistance or federal grant reporting requirements do not apply.

36. What is the status of 49SAF dollars currently?

Please review our most recently posted executive summary. As of June 30, 2017 all capital at the 49th State Angel Fund has been obligated, although this may change depending on individual 49SAF Partner Fund performance and returns. All dollars have been drawn down from US Treasury, with Anchorage proceeding through all three stages (tranches) of the program.